The Tipped Minimum Wage Hasn’t Budged in 25 Years. That’s a Problem.

Morgan Spears, Emerson National Hunger Fellow
The Leadership Conference Education Fund

Indivar Dutta-Gupta, Director, Project on Deep Poverty and Senior Fellow
Georgetown Center on Poverty and Inequality

After a quarter century, change has yet to come for tipped workers in the United States. Since 1991 – the last time the federal tipped minimum wage was increased – the first iPod was released and Google registered its domain. Twenty-five years later, real GDP per capita has grown more than 40 percent and worker productivity has grown more than 70 percent – yet the tipped minimum wage remains frozen at $2.13 per hour, declining in inflation-adjusted value by nearly half.

We now have the largest gap in history between the minimum wage and the subminimum wage for tipped working people. According to the Council of Economic Advisers, “average hourly wages for workers in predominantly tipped occupations are nearly 40 percent lower than overall average hourly wages.” In other words, on average, tipped workers are likely penalized by relying on tips.

Who Are Tipped Working People?

Tipped working people are disproportionately women and nearly half of tipped working people are 30 years old or older. For these workers and their families, the current tipped minimum wage makes it difficult to make ends meet.

Kamali, a single African-American mother and waitress in metropolitan Atlanta making a base pay of $2.25 per hour, finds it challenging to sustain her family on the tipped minimum wage. “There is too much uncertainty. Some days I don’t know what I am going to bring home. I am often worried about making ends meet because it fluctuates so much. I have no security.”

Tipped working people are often forced to work another job because they can’t support their families solely off of tips. And studies show that 1 in 7 tipped working people receive public assistance.

Essentially, tipped working peoples’ income is dependent upon the whims of their customers. Although employers are obligated to meet the difference between the tipped minimum wage and the full minimum wage, many do not. Due to failures in tracking employee tips and enforcement challenges, these working people at times earn less than the full minimum wage over the course of a year. In fact, tipped working people experience nearly twice the poverty rate (12.8 percent) as non-tipped working people (6.5 percent).

“It’s not fair.” Billye, a former bartender in North Carolina, shared how the subminimum wage poses a lot of conflict. “We don’t think about the people that are serving us. Many people go out to eat and don’t tip because the food is bad or whatever the reason is and they forget the person that is serving them – we are supplementing their income. We have to see people in serving positions as human beings. We have taken [tipped workers] for granted and feel as though we are obligated to their services. Asking people to live off of tips is ridiculous.”

The Practice of Tipping is Rooted in Racial Injustice

Not only is the current rate of $2.13 per hour difficult for families to survive on, the subminimum wage is rooted in post-abolition racist attitudes. Although the practice of ‘tipping’ dates to European aristocrats, America’s culture of tipping emerged on the premise of undercutting free African Americans from receiving equal pay. Prior to the emancipation of African Americans, tipping was not socially welcomed. It expanded in America as a way to demean and degrade African Americans as servants in what were considered “menial” jobs. It may be less visible to us now, but today’s $2.13 tipped minimum wage continues the legacy of a caste system by perpetuating racial and gender inequality, while dehumanizing millions of hardworking people. This continued racial injustice is a reason why an overall increase of the minimum wage was a core demand of the August 1963 March on Washington.

Making Change, Makes Sense

This injustice can be easily corrected. Researchers at the Food Labor Research Center at the University of California, Berkeley found that a proposal to raise the tipped minimum wage over three years to the point of more than doubling the wages of tipped working people would result in retail grocery store food prices rising by an average of less than half a percent and restaurant prices by less than one percent a year – equivalent to an increased overall cost of food of just a dime per day per household in America during the phase-in period. At very little cost, eliminating a separate minimum wage for tipped workers would promote racial and gender equity, reduce poverty and wage inequality, and provide security and stability to vulnerable workers and their families. This powerful change is long overdue.

For more information, click here to read the report Raising Wages, Reducing Inequality, Sustaining Families: Why raising the minimum wage is a civil and human rights issue.